US stocks gain, yen jumps on volatility concerns

The yen jumped as an official from the Group of Seven nations said the countries are concerned about volatility in Japan's currency. US stocks advanced as investors dissected earnings reports and awaited President Barack Obama's State of the Union speech tonight.

The yen surged 0.9 per cent to 93.49 per dollar at 1:05 p.m. in New York. The Standard & Poor's 500 Index climbed 0.3 per cent, returning to a five-year high, and the Stoxx Europe 600 Index added 0.5 per cent. South Korea's Kospi Index closed 0.3 per cent lower, erasing a 0.4 per cent advance, after North Korea tested a nuclear weapon. Yields on Spain's 10-year bond fell 10 basis points to 5.32 per cent. Industrial metals rallied, while corn slid for an eighth day, the longest streak since 2010.

Japan's currency was higher against all 16 major peers after the G-7 official, who requested not to be further identified, said the group is concerned about excess moves in the yen and investors misinterpreted an earlier statement on exchange rates. The clarification came hours after the world's major industrial economies appeared to signal acceptance for a weaker Japanese currency so long as Prime Minister Shinzo Abe's government didn't actively pursue devaluation.

"It was a vague, bland statement at first," Joe Manimbo, a market analyst at Western Union Business Solutions, a unit of Western Union Co., said by telephone from Washington, D.C. "When we got the subsequent clarification, it showed officials were really concerned about the pace of yen weakness, which they seem to see as a potential threat to global growth."

Yen Watch

The yen has weakened 18 per cent against the dollar since its 2012 high in February amid speculation of further stimulus measures to bolster Japan's economy. The yen slumped against the dollar yesterday as Haruhiko Kuroda, a possible contender for Bank of Japan governor, said additional monetary easing could be justified this year. US Treasury Undersecretary Lael Brainard said she supports Japan's effort to end deflation after the yen slid for four straight months through the end of January.

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The yen climbed 0.8 per cent to 125.50 per euro as it gained at least 0.3 per cent versus all 16 major peers. The Dollar Index, a gauge of the US currency against six major peers, slipped 0.4 per cent to 79.99. The pound sank against 13 of 16 major peers as U.K. inflation last month held at the highest since May.

G-7 finance ministers and central-bank governors said in the earlier statement released in London, "we reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates."

'Currency Skirmish'

They will join officials from the G-20, which includes the G-7 and emerging markets such as Brazil, China and India, in Moscow on Feb. 15-16.

"It's more of a currency skirmish than a currency war," Nick Bennenbroek, head of currency strategy at Wells Fargo & Co, said on Bloomberg Television's "Market Movers" with Tom Keene, Scarlet Fu and Sara Eisen. "The international countries are trying to put pressure on Japan, but it's not clear they're willing to go to the next step and take the next actions."

Earnings have exceeded the average analyst estimate at about 74 per cent of the 354 companies in the S&P 500 that released results so far in the earnings season, and 66 per cent have beaten sales estimates, data compiled by Bloomberg show.

The S&P 500 has rallied 6.6 per cent in 2013 as US lawmakers reached a budget compromise. The gauge is about 3 per cent below its record reached in October 2007. It has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond-buying to lower interest rates and boost economic growth.

Obama tonight will propose spending on infrastructure, clean energy and education, according to an administration official briefed on the speech. His argument, directed at congressional Republicans amid a battle over fiscal policy, is that fostering economic growth is the best strategy to narrow a federal budget gap that has exceeded $US1 trillion in each of the last four years.

European Markets

Today's gain trimmed the Stoxx 600's drop from this year's high on Jan. 29 to 1.1 per cent. The volume of shares changing hands in Stoxx 600 companies was 11 per cent lower than the 30- day average, according to data compiled by Bloomberg.

Barclays Plc climbed 8.6 per cent as the U.K. bank said it will eliminate 3,700 jobs to reduce costs after posting its first full-year loss in more than two decades. L'Oreal SA, the world's largest cosmetics maker, rallied 3.8 per cent as earnings increased.

Finmeccanica SpA, Italy's biggest defense company, plunged 7.3 per cent as two people familiar with the matter said Chief Executive Officer Giuseppe Orsi was arrested amid a probe of possible bribes paid to win the sale of 12 helicopters to India.

Barclays Cuts

Spanish and Italian bonds advanced as the two nations auctioned a total of 14 billion euros ($US18.8 billion) of bills. The yield on Spain's two-year notes slipped 10 basis points to 2.69 per cent, and the rate on similar-maturity Italian debt slipped eight basis points to 1.65 per cent.

The MSCI Emerging Markets Index was little changed and is up 0.4 per cent for the year. That compares with a 5.7 per cent gain in 2013 for the MSCI World Index of developed nations. Sixty-one per cent of companies in the MSCI gauge for emerging markets have reported quarterly profit that missed estimates, almost twice the rate for developed nations, Bloomberg data show.

Poland's WIG20 Index lost 1.1 per cent as Telekomunikacja Polska SA, the nation's largest phone company, tumbled 28 per cent after cutting its dividend proposal for the second time in four months. India's Sensex Index jumped 0.5 per cent, snapping an eight-day rout. Indonesia's benchmark gauge jumped 1 per cent. Markets in China, Taiwan, Malaysia and Vietnam are shut for Lunar New Year.

Nickel and lead added at least 1.1 per cent for the biggest gains in the S&P GSCI Index of commodities, while losses in sugar, cattle, wheat and cotton left the gauge little changed. Corn dropped 1.1 per cent on forecasts for increased production. Oil rose 0.5 per cent to $US97.49 per barrel in New York.